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Stocks jumped on Friday as central banks are reasserting themselves over financial markets, with fresh stimulus form China. The PBOC cut interest rates Friday, a day after the ECB signaled it will bolster stimulus if needed. Equity futures were showing early morning strength because of better than expected earnings and the Chinese news amplified the bullish atmosphere. The dollar rallied and is now on the longest winning streak in 10 months. Commodities, led by oil which has now declined three consecutive weeks, fell.
Somewhere sometime this massive stimulus will impact the real economy. Were ECB and Chinese actions the proverbial grain of sand that will topple the pile, or in this case, cause growth to accelerate?
Most will agree monetary policy has not produced the economic growth that was expected with some of the stimulus gravitating into the equity markets.
In my view, last week’s rally felt anemic. Could a case be made the markets traded off of yesterday’s patterns meaning add stimuli and markets will advance? I think yes.
Speaking of the real economy, this week can be of significance. There is a Fed meeting where no change in policy is expected. The preliminary estimates of third quarter GDP is released. Will growth contain a “two” or “one handle?” Also posted are consumer confidence, several manufacturing indices and housing statistics.
Additionally a plethora of companies post earnings.
How will all of the above be interpreted? At some juncture, change will occur.
Last night the foreign markets were mixed. London was down 01.5%, Paris down 0.56% and Frankfurt up 0.17%. China was up 0.50%, Japan up 0.75% and Hang Sang down 01.5%.
The Dow should open quietly lower ahead of a bid data, earnings and meeting week. The 10-year is

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.